Merchants See Dip in Fraud Thanks to Chip Cards

New chip-enabled cards are flowing into the U.S. marketplace and already made a dent in fraud, with some of the biggest merchants seeing a dip of more than 18% in counterfeit transactions, according to Visa.

Among the 25 merchants who were suffering the most instances of counterfeit fraud at the end of 2014, five that began processing credit and debit cards equipped with the new EMV technology saw those infractions fall 18.3% as of the final quarter of 2015, says Stephanie Ericksen, vice president of risk products at Visa. Meanwhile, five of those merchants who were not yet equipped to handle chip-enabled cards saw an increase in fraudulent transactions of 11.4%.

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“We’re seeing EMV is having a positive impact on counterfeit fraud,’’ Ericksen says. “Merchants who implement chip, their counterfeit fraud is going down, while those still finalizing plans, their counterfeit fraud is going up.’’

The electronic payment industry has long called for adoption of such technology, but a series of high-profile data breaches at companies such as Target have underscored the need for more consumer protections.

Microchip embedded cards, already common in Europe and Brazil are considered a more secure alternative to those bearing just a magnetic stripe because they generate a unique code for each transaction. That makes them more difficult to counterfeit, and helps to cut down on fraudulent uses.

To usher the transition along, a shift occurred as of last October. Merchants who didn’t have a terminal that could process a chip card when presented could be liable, instead of the bank, if fraud occurred on that transaction.

After a slow start, both Visa and MasterCard say that the rollout of chip-enabled cards, as well as terminals that can accept them is moving along at a strong pace. Visa says that it has issued roughly 265 million chip enabled credit and debit cards so far, making the U.S. the world’s biggest market. And over one million, or about 20%, of merchant locations were processing chip cards.

MasterCard meanwhile says that as of last month, 70% of its consumer credit cards were chip equipped, a 50% bump since October of last year.

Visa on Tuesday also announced a software upgrade that will shave the amount of time spent on chip card transactions. With “Quick Chip,’’ consumers can dip their chip cards into the terminal and withdraw it in two seconds or less, instead of waiting until their purchase is authorized.

The consumer can “put the card in the terminal and put it right back in your wallet and . . .move to get their coffee, or hamburger or start bagging their groceries,’’ Ericksen says.

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Though the screen prompting shoppers to remove their card will pop up faster, the overall transaction may only be seconds shorter. “But from a consumer perspective, leaving your card in the terminal makes it feel longer. . ..So we wanted to work on ways to make it, from a consumer experience perspective, and from the merchant perspective, a lot more seamless.’’

Visa is providing the software upgrade, at no cost to banks and other payment processors, who can then make it available to merchants.

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